ONGC makes paltry $47 a barrel, rupee gives cushion

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Oil and Natural Gas Corporation (ONGC) realised only $47 a barrel on the crude oil it sold during the first quarter, marginally lower than $49 realised in the same quarter last year even as its cost has moved up due to a production cess imposed in the union budget. This may show on the company’s first quarter result that is scheduled to be declared during the weekend though substantial relief may come from the weaker Rupee.

ONGC billed its crude at $110 per barrel during the quarter but got only $47 per barrel after giving the oil marketing companies (OMCs) a discount of $63 per barrel. Under the government’s oil subsidy sharing mechanism, ONGC and Oil India are required to give discounts on their crude oil sale to government OMCs- IndianOil, Bharat Petroleum and Hindustan Petroleum. In the first quarter of last fiscal, ONGC had given discounts of $72.53 per barrel amounting to a total of around Rs 12,046 crore. The discount for Q1 ended June 30 this fiscal is Rs 12,345 crore.

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ONGC’s cost of production is $47 per barrel of crude, company Chairman Sudheer Vasudeva said recently. Given the cost, the company’s margin on crude oil is certainly under pressure during the first quarter. “Even though the Q1 realisation may be lower than last year’s corresponding quarter, the 24 per cent depreciation in Indian Rupee vis a vis US Dollar, will still help ONGC post decent profits", said a sector analyst. ONGC had made net profit of Rs 4,095 crore in the first quarter of last fiscal.

Net realisation for Oil India Ltd, however, was higher at $53.85 per barrel for the quarter after it gave the OMCs a discount of Rs $56 per barrel. OIL’s net realisation fell from $59.55 to $53.85 but in rupee terms rose by 9.42 per cent due to rupee depreciation and helped the company report higher profit.

An ONGC official explained that the higher subsidy burden of $63 per barrel on the company vis a vis OIL’s $56 is due to the inclusion of condensates in the governmet’s subsidy calculation mechanism. In the last fiscal, ONGC is estimated to have taken an additional subsidy burden of Rs 4,500 crore on account of condensates. FY12 was the first year when the government calculated ONGC’s share of subsidy based on its production. Earlier, the share of ONGC and OIL used to be calculated in the ratio of net profits.

Oil India reports over 9% jump in profit:Riding on a weaker Rupee, Oil India Ltd has reported a 9.45 per cent increase in net profit for the quarter ended June 30. Profit for the quarter stood at Rs 930 crore against Rs 849.61 crore in corresponding quarter of last year even as its subdisy burden rose over 13 per cent to Rs 2,015 crore. Turnover for the quarter rose over 8 per cent to Rs 2,439 crore. The company produced 946,000 tonnes of crude oil during the quarter, down nearly 2 per cent from last year. Gas production was 0.626 billion cubic metre, down 2.34 per cent.